<PAGE>


                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the quarterly period ended June 30, 2004

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

         For the transition period from _____________to _______________________

                        Commission file number 000-32641

                           JAMES MONROE BANCORP, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)

                 VIRGINIA                                54-1941875
  (State or Other Jurisdiction             (I.R.S. Employer Identification No.)
of Incorporation or Organization)


                  3033 WILSON BLVD., ARLINGTON, VIRGINIA 22201
                    (Address of Principal Executive Offices)

                                  703-524-8100
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
     (Former Name, Former Address and Former Fiscal Year, If Changed Since
                                  Last Report)


Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X_ No |_|.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of July 31, 2004.


           Common stock, $1 par value-- 4,437,369 shares outstanding.




                                       1

<PAGE>


                           JAMES MONROE BANCORP, INC.
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                    Page No.
                                                                                    --------
<S>       <C>                                                                       <C>
Part I.   Financial Information

          Item 1.  Financial Statements
                   Consolidated Balance Sheets at June 30, 2004,
                        December 31, 2003, and June 30, 2003                           3
                   Consolidated Statements of Income for the three months and
                         six months ended June 30, 2004 and 2003                       4
                   Consolidated Statements of Changes in Stockholders'
                        Equity for the six months ended June 30, 2004 and 2003         5
                   Consolidated Statements of Cash Flows for the six months
                        ended June 30, 2004 and 2003                                   6
                   Notes to Interim Consolidated Financial Statements                  7

          Item 2.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                                13

          Item 3.  Controls and Procedures                                            28

Part II.  Other Information

          Item 1.  Legal Proceedings                                                  29

          Item 2.  Changes in Securities and Small Business Issuer
                   Purchases of Equity Securities                                     29

          Item 3.  Defaults Upon Senior Securities                                    29

          Item 4.  Submission of Matters to a Vote of Security Holders                29

          Item 5.  Other Information                                                  29

          Item 6.  Exhibits and Reports on Form 8-K                                   29

</TABLE>


                                       2
<PAGE>

                         PART I. Financial Information

Item 1. Financial Statements

                           JAMES MONROE BANCORP, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
               June 30, 2004, December 31, 2003, and June 30, 2003
                    (Dollars in thousands, except share data)

<TABLE>
<CAPTION>

                                                                   (Unaudited)       (Audited)      (Unaudited)
                                                                     JUNE 30,       DECEMBER 31,      JUNE 30,
                                                                      2004             2003            2003
                                                                    ---------        ---------       ---------
<S>                                                                 <C>              <C>             <C>
ASSETS
Cash and due from banks                                             $  23,604        $  11,908       $  22,182
Interest bearing deposits in banks                                          -                -             547
Federal funds sold                                                     42,129                -          42,424
Securities available for sale, at fair value                           84,875          122,328          81,580
Mortgages held for sale                                                   250              561           3,484
Loans, net of allowance for loan losses of $2,305
  at June 30, 2004, $1,955 at December 31,
  2003 and $1,669 at June 30, 2003                                    202,320          167,092         144,018
Bank premises and equipment, net                                        2,196            1,388           1,416
Accrued interest receivable                                             1,235            1,336           1,084
Other assets                                                            1,860            1,038             319
                                                                    ---------        ---------       ---------

TOTAL ASSETS                                                        $ 358,469        $ 305,651       $ 297,054
                                                                    =========        =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Noninterest bearing deposits                                      $  93,427        $  65,598       $ 106,861
  Interest bearing deposits                                           220,794          189,518         164,238
                                                                    ---------        ---------       ---------
Total deposits                                                        314,221          255,116         271,099
Federal funds purchased                                                     -            6,886               -
Trust preferred capital notes                                           9,000            9,000           5,000
Accrued interest payable and other liabilities                            703              758             741
                                                                    ---------        ---------       ---------
  Total liabilities                                                   323,924          271,760         276,840
                                                                    ---------        ---------       ---------

STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
  10,000,000 shares; issued and outstanding
  4,437,369 at June 30, 2004, 2,943,802 shares
  at December 31, 2003, 2,303,275 at June 30,
  2003                                                                  4,437            2,944           2,303
Capital surplus                                                        24,197           25,425          12,946
Retained earnings                                                       6,928            5,491           3,963
Accumulated other comprehensive income (loss)                          (1,017)              31           1,002
                                                                    ---------        ---------       ---------
Total stockholders' equity                                             34,545           33,891          20,214
                                                                    ---------        ---------       ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 358,469        $ 305,651       $ 297,054
                                                                    =========        =========       =========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       3
<PAGE>


                           JAMES MONROE BANCORP, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                       (Unaudited)                    (Unaudited)
                                                              THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                                                              ---------------------------      -------------------------
                                                                2004               2003         2004              2003
                                                              -------            --------      ------            ------
<S>                                                            <C>               <C>           <C>               <C>
INTEREST AND DIVIDEND INCOME:
 Loans, including fees                                         $3,027            $2,383        $5,810            $4,573
 Loans held for sale                                               10                25            18                25
 Securities, taxable                                              802               692         1,825             1,390
 Federal funds sold                                                41                62            50                99
 Other interest income                                              -                 -             -                 1
                                                               ------            ------        ------            ------
Total interest and dividend income                              3,880             3,162         7,703             6,088
INTEREST EXPENSE:
 Deposits                                                         887               838         1,718             1,650
 Borrowed funds                                                   115                63           246               127
                                                               ------            ------        ------            ------
Total interest expense                                          1,002               901         1,964             1,777
                                                               ------            ------        ------            ------
Net interest income                                             2,878             2,261         5,739             4,311
PROVISION FOR LOAN LOSSES                                         194               171           493               349
                                                               ------            ------        ------            ------
Net interest income after provision for loan losses             2,684             2,090         5,246             3,962
NONINTEREST INCOME:
 Service charges and fees                                          98                80           182               155
 Gain on sale of securities                                        14                41            54                56
 Gain on sale of mortgage loans                                   108                85           171                85
 Other                                                             89                74           183               133
                                                               ------            ------        ------            ------
Total noninterest income                                          309               280           590               429
NONINTEREST EXPENSES:
 Salaries and wages                                               972               642         1,816             1,228
 Employee benefits                                                163               105           342               209
 Occupancy expenses                                               163               148           328               303
 Equipment expenses                                                92               104           166               200
 Other operating expeses                                          551               449           986               848
                                                               ------            ------        ------            ------
Total noninterest expenses                                      1,941             1,448         3,638             2,788
                                                               ------            ------        ------            ------
Income before income taxes                                      1,052               922         2,198             1,603
PROVISION FOR INCOME TAXES                                        366               312           758               529
                                                               ------            ------        ------            ------
Net income                                                     $  686            $  610        $1,440            $1,074
                                                               ======            ======        ======            ======

EARNINGS PER SHARE, basic                                      $ 0.15            $ 0.17        $ 0.32            $ 0.31
EARNINGS PER SHARE, diluted                                    $ 0.15            $ 0.17        $ 0.31            $ 0.29

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



                                       4
<PAGE>

                           JAMES MONROE BANCORP, INC.
                                AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 For the Six Months Ended June 30, 2004 and 2003
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                        ACCUMULATED
                                                                           OTHER                               TOTAL
                                         COMMON    CAPITAL   RETAINED   COMPREHENSIVE   COMPREHENSIVE      STOCKHOLDERS'
                                         STOCK     SURPLUS   EARNINGS   INCOME (LOSS)       INCOME            EQUITY
                                        -------   --------   --------   -------------   -------------      -------------
<S>                                     <C>       <C>         <C>            <C>            <C>               <C>
BALANCE, JANUARY 1, 2003                $ 1,841   $ 13,354    $ 2,894        $ 1,106                          $ 19,195
Comprehensive income:
  Net income                                                    1,074                       $ 1,074              1,074
  Net change in unrealized gain
    on available for sale securities,
    net of deferred taxes of $54                                                (104)          (104)              (104)
                                                                                            -------
Total comprehensive income                                                                  $   970
                                                                                            =======
Issuance of common stock                      2         52                                                          54
Effect of stock split                       460       (460)                                                          -
Cash paid in lieu of fractional shares                             (5)                                              (5)
                                        -------   --------    -------        -------                          --------
BALANCE, JUNE 30, 2003                  $ 2,303   $ 12,946    $ 3,963        $ 1,002                          $ 20,214
                                        =======   ========    =======        =======                          ========

<CAPTION>

                                                                        ACCUMULATED
                                                                           OTHER                               TOTAL
                                         COMMON    CAPITAL   RETAINED   COMPREHENSIVE   COMPREHENSIVE      STOCKHOLDERS'
                                         STOCK     SURPLUS   EARNINGS   INCOME (LOSS)       INCOME            EQUITY
                                        -------   --------   --------   -------------   -------------      -------------
<S>                                     <C>       <C>         <C>            <C>            <C>               <C>
BALANCE, JANUARY 1, 2004                $ 2,944   $ 25,425    $ 5,491        $    31                          $ 33,891
Comprehensive income:
  Net income                                                    1,440                       $ 1,440              1,440
  Net change in unrealized (loss)
  on available for sale securities,
  net of deferred taxes of $540                                              (1,048)         (1,048)            (1,048)
                                                                                            -------
Total comprehensive income                                                                  $   392
                                                                                            =======
Exercise of stock options                    12        179                                                         191
Issuance of common stock                      3         71                                                          74
Effect of stock split                     1,478     (1,478)                                                          -
Cash paid in lieu of fractional shares                             (3)                                              (3)
                                        -------   --------    -------        -------                          --------
BALANCE, JUNE 30, 2004                  $ 4,437   $ 24,197    $ 6,928       $(1,017)                          $ 34,545
                                        =======   ========    =======       ========                          ========


</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       5
<PAGE>

                           JAMES MONROE BANCORP, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Six Months Ended June 30, 2004 and 2003
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                               SIX MONTHS ENDED JUNE 30,
                                                                               -------------------------
                                                                                  2004          2003
                                                                                --------      --------
<S>                                                                             <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                      $  1,440      $  1,074
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
 Depreciation and amortization                                                       131           151
 Provision for loan losses                                                           493           349
 Amortization of bond premium                                                        176           234
 Accretion of bond discount                                                          (18)          (40)
 Realized (gain) on sales of securities available for sale                           (54)          (56)
 Realized (gain) on sales of mortgage loans held-for-sale                           (171)          (85)
 Originiation of mortgage loans held-for-sale                                     (8,589)      (17,039)
 Proceeds from sales of mortgage loans held-for-sale                               9,071        13,640
 Deferred income tax (benefit)                                                      (185)         (106)
 (Increase) decrease in accrued interest receivable                                  101          (168)
 (Increase) decrease in other assets                                                 (97)          188
 Increase (decrease) in accrued interest payable and other liabilities               (55)           13
                                                                                --------      --------
   Net cash provided by (used in) operating activities                             2,243        (1,900)
                                                                                --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchases of securities available for sale                                      (14,322)      (59,932)
 Proceeds from calls and maturities of securities available for sale              13,917        12,391
 Proceeds from sales of securities available for sale                             36,169        41,728
 Purchases of premises and equipment                                                (939)         (234)
 (Increase) in Federal funds sold                                                (42,129)      (13,490)
 Net (increase) in loans                                                         (35,721)      (24,710)

                                                                                --------      --------
   Net cash (used in) investing activities                                       (43,028)      (44,247)
                                                                                --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net increase in demand deposits, savings deposits
 and money market accounts                                                        54,964        55,414
 Net increase in time deposits                                                     4,141         1,815
 Net (decrease) in Federal funds purchased                                        (6,886)            -
 Proceeds from issuance of common stock                                              265            54
 Cash paid in lieu of fractional shares                                               (3)           (5)
                                                                                --------      --------
   Net cash provided by financing activities                                      52,481        57,278
                                                                                --------      --------

Increase in cash and due from banks                                             $ 11,696      $ 11,131
CASH AND DUE FROM BANKS
 Beginning                                                                      $ 11,908      $ 11,051
                                                                                --------      --------
 Ending                                                                         $ 23,604      $ 22,182
                                                                                ========      ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid on deposits and borrowed funds                                  $  1,897      $  1,816
                                                                                ========      ========
  Income taxes paid                                                             $    851      $    443
                                                                                ========      ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES,
 unrealized (loss) on securities available for sale                             $ (1,588)     $   (158)
                                                                                ========      ========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



                                       6
<PAGE>

                   JAMES MONROE BANCORP, INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1.

Organization. James Monroe Bancorp, Inc. was incorporated under the laws of the
Commonwealth of Virginia on April 9, 1999 to be the holding company for James
Monroe Bank. James Monroe Bancorp acquired all of the shares of James Monroe
Bank on July 1, 1999 in a mandatory share exchange under which each outstanding
share of common stock of James Monroe Bank was exchanged for one share of James
Monroe Bancorp common stock. James Monroe Bank, a Virginia chartered commercial
bank, which is a member of the Federal Reserve System, is James Monroe Bancorp's
sole operating subsidiary. James Monroe Bank commenced banking operations on
June 8, 1998. As of June 30, 2004 the Company operated the main office in
Arlington, Virginia, one branch in Annandale, Virginia, one branch and a
drive-up facility in Leesburg, Virginia, and one branch in Fairfax City,
Virginia.

Basis of Presentation. In the opinion of management, the accompanying unaudited
consolidated financial statements of James Monroe Bancorp, Inc. and Subsidiaries
(the Company) have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all the information and footnotes required for complete financial
statements. In the opinion of management, all adjustments and reclassifications
necessary for a fair presentation have been included. Operating results for the
six month period ended June 30, 2004 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2004, or any other
period. The unaudited interim consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and footnotes
for the year ended December 31, 2003.

Stock Compensation Plans. At June 30, 2004, the Company had three stock based
compensation plans. The Company accounts for these plans under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of the grant. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock Based Compensation, to stock
based employee compensation. The per share calculations have been restated to
reflect the 3-for-2 stock split discussed in Note 7 and all preceding stock
splits.

<TABLE>
<CAPTION>

                                                          THREE-MONTH ENDED      SIX-MONTH ENDED
                                                               JUNE 30,             JUNE 30,
                                                          -----------------    ---------------------
                                                           2004       2003      2004         2003
                                                          ------     ------    -------     ---------
<S>                                                        <C>       <C>       <C>         <C>
(Dollars in thousands, except per share data)

Net income, as reported                                    $ 685     $ 610     $ 1,440     $   1,074
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards                           (111)       (9)       (442)          (18)
                                                           -----     -----     -------     ---------
Pro forma net income                                       $ 575     $ 601     $   998     $   1,056
                                                           =====     =====     =======     =========

Earnings per share:
     Basic- as reported                                     0.15      0.17        0.32          0.31
                                                           =====     =====     =======     =========
     Basic- pro forma                                       0.13      0.17        0.23          0.31
                                                           =====     =====     =======     =========
     Diluted- as reported                                   0.15      0.17        0.31          0.29
                                                           =====     =====     =======     =========
     Diluted- pro forma                                     0.12      0.16        0.21          0.29
                                                           =====     =====     =======     =========

</TABLE>


                                       7
<PAGE>


         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
results:

                                                                 2004
                                                            ---------
              Dividend yield                                    0.00%
              Expected life                                 8.1 years
              Expected volatility                              37.69%
              Risk free interest rate                           3.86%

NOTE 2.

Earnings Per Share. The following table discloses the calculation of basic and
diluted earnings per share for the three months and six months ended June 30,
2004 and 2003. The average shares outstanding and per share calculations have
been restated to reflect the 3-for-2 stock split discussed in Note 7 and all
preceding stock splits.

<TABLE>
<CAPTION>

                                                                THREE-MONTHS ENDED               SIX-MONTHS ENDED
                                                                    JUNE 30,                          JUNE 30,
                                                        ------------------------------      ---------------------------
                                                            2004              2003              2004            2003
                                                        ------------       -----------      ----------       ----------
<S>                                                       <C>              <C>              <C>              <C>
(Dollars in thousands, except per share data)
Net Income                                                $      686       $      610       $    1,440       $    1,074
                                                          ==========       ==========       ==========       ==========

Weighted average shares outstanding--basic                 4,435,638        3,452,919        4,432,540        3,451,943
Common share equivalents for stock options                   240,877          262,952          237,088          244,710
                                                          ----------       ----------       ----------       ----------
Weighted average shares outstanding--diluted               4,676,515        3,715,871        4,669,628        3,696,653
                                                          ==========       ==========       ==========       ==========

Earnings per share-basic                                  $     0.15       $     0.17       $     0.32       $     0.31
                                                          ==========       ==========       ==========       ==========
Earnings per share-diluted                                $     0.15       $     0.17       $     0.31       $     0.29
                                                          ==========       ==========       ==========       ==========

</TABLE>


                                       8
<PAGE>


NOTE 3.

Securities available for sale. Securities available for sale are reported at
fair value with unrealized gains and losses (net of income taxes) recorded in
stockholders' equity as a component of "accumulated other comprehensive income."
Actual gains and losses on the sales of these securities, if any, are computed
using the specific identification method and included in "gain (loss) on sale of
securities" on the income statement. The amortized cost and carrying value
(estimated market value) of securities available for sale at June 30, 2004,
December 31, 2003, and June 30, 2003, are summarized in the tables that follow.
The Company classifies all securities as available for sale.

<TABLE>
<CAPTION>

                                                                     June 30, 2004
                                                 --------------------------------------------------------
                                                                  Gross           Gross         Estimated
                                                 Amortized     Unrealized       Unrealized        Market
(Dollars in thousands)                              Cost          Gains           Losses          Value
                                                 ---------       --------        --------        --------
<S>                                              <C>             <C>             <C>             <C>
U.S. Government and federal agency                $ 66,193       $     21        $ (1,290)       $ 64,924
Mortgage-backed securities                          17,077            115            (416)         16,776
Corporate notes                                      2,157             55             (25)          2,187
Restricted Stock                                       988              -               -             988
                                                  --------       --------        --------        --------
                                                  $ 86,415       $    191        $ (1,731)       $ 84,875
                                                  ========       ========        ========        ========
<CAPTION>

                                                                     December 31, 2003
                                                 --------------------------------------------------------
                                                                  Gross           Gross         Estimated
                                                 Amortized     Unrealized       Unrealized        Market
(Dollars in thousands)                              Cost          Gains           Losses          Value
                                                 ---------       --------        --------        --------
<S>                                              <C>             <C>             <C>             <C>
U.S. Government and federal agency               $  95,196      $     322       $    (589)      $  94,929
Mortgage-backed securities                          19,883            206            (162)         19,927
Corporate notes                                      6,301            279              (9)          6,571
Restricted Stock                                       901              -               -             901
                                                 ---------      ---------       ---------       ---------
                                                 $ 122,281      $     807       $    (760)      $ 122,328
                                                 =========      =========       =========       =========
<CAPTION>

                                                                       June 30, 2003
                                                 --------------------------------------------------------
                                                                  Gross           Gross         Estimated
                                                 Amortized     Unrealized       Unrealized        Market
(Dollars in thousands)                              Cost          Gains           Losses          Value
                                                 ---------       --------        --------        --------
<S>                                              <C>             <C>             <C>             <C>
U.S. Government and federal agency                $ 47,550       $    392        $    (20)       $ 47,922
Mortgage-backed securities                          19,045            411              (6)         19,450
Corporate notes                                     12,626            757             (16)         13,367
Restricted Stock                                       841              -               -             841
                                                  --------       --------        --------        --------
                                                  $ 80,062       $  1,560        $    (42)       $ 81,580
                                                  ========       ========        ========        ========

</TABLE>



                                       9
<PAGE>

NOTE 4.

Loans. Major classifications of loans at June 30, 2004, December 31, 2003, and
June 30, 2003 are summarized in the following table.

<TABLE>
<CAPTION>

                                                          JUNE 30,         DECEMBER 31,         JUNE 30,
(Dollars in thousands)                                      2004               2003               2003
                                                         ---------          ---------          ---------
<S>                                                      <C>                <C>                <C>
Construction loans                                       $  22,691          $  18,130          $  17,342
Commercial loans                                            30,112             24,885             23,430
Commercial real estate loans                               138,783            113,316             93,952
Real estate-1-4 family residential                           1,638              3,801              1,251
Home equity loans                                            4,720              3,193              2,935
Consumer loans                                               6,482              5,691              6,709
Deposit overdrafts                                             199                 31                 68
                                                         ---------          ---------          ---------
                                                           204,625            169,047            145,687
Less allowance for loan losses                              (2,305)            (1,955)            (1,669)
                                                         ---------          ---------          ---------
Net Loans                                                $ 202,320          $ 167,092          $ 144,018
                                                         =========          =========          =========
</TABLE>

Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>

                                                            SIX-MONTHS ENDED   YEAR ENDED,    SIX-MONTHS ENDED
                                                                JUNE 30,      DECEMBER 31,        JUNE 30,
(Dollars in thousands)                                            2004            2003              2003
                                                               ---------      ------------    ----------------
<S>                                                            <C>             <C>                <C>
Beginning balance                                              $   1,955       $   1,390          $   1,390
Loan charge-offs:
 Commercial                                                         (135)            (71)               (34)
 Consumer                                                             (9)            (41)               (36)
                                                               ---------       ---------          ---------
    Total charge-offs                                               (144)           (112)               (70)
Recoveries of loans previously charged-off:
 Commercial                                                            -              15                  -
 Consumer                                                              1               -                  -
                                                               ---------       ---------          ---------
    Total recoveries                                                   1              15                  -
                                                               ---------       ---------          ---------
  Net charge-offs                                                   (143)            (97)               (70)
                                                               ---------       ---------          ---------
Provision for loan losses                                            493             662                349
                                                               ---------       ---------          ---------
Ending balance                                                 $   2,305       $   1,955          $   1,669
                                                               =========       =========          =========
</TABLE>



                                       10
<PAGE>


The following table presents the amounts of nonperforming assets at the dates
indicated.


                                               JUNE 30,  DECEMBER 31,  JUNE 30,
(Dollars in thousands)                           2004       2003        2003
                                               --------    -------     -------
Nonaccrual loans
  Commercial                                     $334        $510        $188
  Consumer                                          -           -           -
                                                 ----        ----        ----
    Total nonaccrual loans                        334         510         188
Loans past-due 90-days or more
  Commercial                                       30           -           -
  Consumer                                          1          34           -
                                                 ----        ----        ----
    Total loans past-due 90-days or more           31          34           -
Restructured loans                                  -           -         228
                                                 ----        ----        ----
    Total nonperforming assets                   $365        $544        $416
                                                 ====        ====        ====


NOTE 5.

Deposits. Interest bearing deposits consist of the following:

<TABLE>
<CAPTION>

                                                       JUNE 30,    DECEMBER 31,    JUNE 30,
(Dollars in thousands)                                  2004          2003          2003
                                                      --------      --------      --------
<S>                                                   <C>           <C>           <C>
NOW accounts                                          $ 17,098      $ 12,068      $ 11,716
Savings accounts                                         3,326         2,846         1,809
Money market accounts                                  147,717       126,091       110,577
Certificates of deposit under $100,000                  12,096        13,115        13,291
Certificates of deposit $100,000 and over               38,986        33,694        25,130
Individual retirement accounts                           1,571         1,704         1,715
                                                      --------      --------      --------
                                                      $220,794      $189,518      $164,238
                                                      ========      ========      ========

</TABLE>


NOTE 6.

Trust Preferred Capital Securities. On March 25, 2002, James Monroe Statutory
Trust I, a subsidiary of the Company, was formed for the purpose of issuing
redeemable trust preferred securities and purchasing the Company's junior
subordinated debentures, which are its sole assets. The Company owns all of
Trust I's outstanding common securities. On March 26, 2002, $5 million of the
trust preferred securities were issued in a pooled underwriting totaling
approximately $500 million. The securities bear interest at a rate equal to the
three month LIBOR plus 360 basis points, subject to a cap of 11% which is set
and payable on a quarterly basis. During 2003, the interest rates ranged from
5.00% to 4.61%. The rate for the quarterly period beginning March 26, 2004, was
4.71%. The securities have a maturity date of March 25, 2032, and are subject to
varying call provisions beginning March 26, 2007.

On July 16, 2003, James Monroe Statutory Trust II, a newly formed subsidiary of
the Company, was formed for the purpose of issuing redeemable trust preferred
securities and purchasing the Company's junior subordinated debentures, which
are its sole assets. The Company owns all of Trust II's outstanding common
securities. On July 31, 2003, $4 million of the trust preferred securities were
issued in a private placement transaction. The securities bear interest at a
rate equal to the three month LIBOR plus 310 basis points, subject to a cap of
12% which is set and payable on a quarterly basis. During 2003, the interest
rates ranged from 4.21% to 4.24%. The rate for the quarterly period beginning
March 31, 2004 was 4.21%. The securities have a maturity date of July 31, 2033,
and are subject to ranging call provisions beginning July 31, 2008.



                                       11
<PAGE>

The trust preferred securities may be included in Tier 1 capital for regulatory
capital adequacy determination purposes up to 25% of Tier 1 capital. The portion
of the securities not considered as Tier 1 capital will be included in Tier 2
capital. At June 30, 2004, all of the trust preferred securities qualified as
Tier 1 capital.

The Company and the Trusts believe that, taken together, the Company's
obligations under the junior subordinated debentures, the Indentures, the Trust
Declarations and the Guarantees entered into in connection with the issuance of
the trust preferred securities constitute a full and unconditional guarantee by
the Company of the Trusts' respective obligations with respect to the trust
preferred securities.

Subject to certain exceptions and limitations, the Company may elect from time
to time to defer interest payments on the junior subordinated debt securities,
which would result in a deferral of distribution payments on the related trust
preferred securities.

NOTE 7.

Common Stock Split. On June 1, 2004 the Company issued 1,478,317 additional
shares necessary to effect a 3-for-2 common stock split for shareholders of
record on May 14, 2004. The earnings per common share for all periods presented
have been restated to reflect the stock split.

On May 16, 2003, the Company issued 459,968 additional shares necessary to
effect a 5-for-4 common stock split for shareholders of record April 25, 2003.
The earnings per common share for all periods prior to May 2003 have been
restated to reflect the stock split.




                                       12
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

         This Management's Discussion and Analysis and other portions of this
report contain forward looking statements within the meaning of the Securities
Exchange Act of 1934, as amended, including statements of goals, intentions, and
expectations as to future trends, plans, events or results of Company operations
and policies and regarding general economic conditions. In some cases, forward
looking statements can be identified by use of such words as "may," "will,"
"anticipate," "believes," "expects," "plans," "estimates," "potential,"
"continue," "should," and similar words or phases. These statements are based
upon current and anticipated economic conditions, nationally and in the
Company's market, interest rates and interest rate policies, competitive
factors, government agencies and other third parties, which by their nature are
not susceptible to accurate forecast, and are subject to significant
uncertainty. Because of these uncertainties and the assumptions on which this
discussion and the forward looking statements are based, actual future
operations and results in the future may differ materially from those indicated
herein. Readers are cautioned against placing undue reliance on any such forward
looking statement.

INTRODUCTION

         This Management's Discussion and Analysis reviews the financial
condition and results of operations of the Company and its subsidiaries as of
and for the three and six months ended June 30, 2004 and 2003. Some tables cover
more than these periods to comply with Securities and Exchange Commission
disclosure requirements or to illustrate trends over a period of time. When
reading this discussion, reference should be made to the consolidated financial
statements and related notes that appear herein and to our consolidated
financial statements and footnotes thereto for the year ended December 31, 2003.

CRITICAL ACCOUNTING POLICIES

         There were no changes to the Company's critical accounting policies in
the second quarter of 2004. Critical accounting policies are those applications
of accounting principles or practices that require considerable judgment,
estimation, or sensitivity analysis by management. In the financial service
industry, examples, albeit not an all inclusive list, of disclosures that may
fall within this definition are the determination of the adequacy of the
allowance for loan losses, valuation of mortgage servicing rights, valuation of
derivatives or securities without a readily determinable market value, and the
valuation of the fair value of intangibles and goodwill. Except for the
determination of the adequacy of the allowance for loan losses, the Company does
not believe there are other practices or policies that require significant
sensitivity analysis, judgments, or estimations.

         Allowance for Loan Losses. The Company has developed a methodology to
determine, on a quarterly basis, an allowance to absorb probable loan losses
inherent in the portfolio based on evaluations of the collectibility of loans,
historical loss experience, peer bank loss experience, delinquency trends,
economic conditions, portfolio composition, and specific loss estimates for
loans considered substandard or doubtful. All commercial and commercial real
estate loans that exhibit probable or observed credit weaknesses are subject to
individual review. If necessary, reserves would be allocated to individual loans
based on management's estimate of the borrower's ability to repay the loan given
the availability of collateral and other sources of cash flow. Any reserves for
impaired loans are measured based on the present rate or fair value of the
underlying collateral. The Company evaluates the collectibility of both
principal and interest when assessing the need for a loss accrual. A composite
allowance factor that considers the Company's and other peer bank loss
experience ratios, delinquency trends, economic conditions, and portfolio
composition are applied to the total of commercial and commercial real estate
loans not specifically evaluated. A percentage of this composite allowance
factor is also applied to the aggregate of unused commercial lines of credit
which the Company has an obligation to honor but where the borrower has not
elected to draw on their lines of credit.

         Homogeneous loans, such as consumer installment, residential mortgage
loans, home equity loans, and smaller consumer loans are not individually risk
graded. Reserves are established for each homogeneous pool of loans based on the
expected net charge offs from a current trend in delinquencies, losses or
historical experience and general economic conditions. The Company has no
material delinquencies in these types of loans, and has not, since inception,
had a trend or an indication of a trend that would guide the Company in expected
material losses in these types of homogeneous pools of loans.


                                       13
<PAGE>


         The Company's allowance for loan losses is determined based upon a
methodology developed by management as described above and is approved by the
board of directors each quarter.

COMPANY HIGHLIGHTS SINCE DECEMBER 31, 2003 ARE:

         o    Assets grew $52.8 million (17%).
         o    Loans grew $35.6 million (21%).
         o    Deposits grew $59.1 million (23%).
         o    Net interest margin was 3.85% for the first six months of 2004
              compared to 3.73% for the full year 2003 and 3.83% during the
              first six months of 2003.
         o    Asset quality remained strong as nonperforming assets declined
              $179 thousand to $365 thousand and the allowance for loan losses
              totaled 1.13% of total loans outstanding.
         o    The Company ended the quarter with excellent liquidity and
              adequate capital to support further growth.
         o    The Company opened a sixth banking office in Chantilly, Virginia
              on July 26, 2004. In addition to the branch site, the Company
              leased 7,000 square feet of space on the second floor of the
              branch building to accommodate expanding administrative,
              operational support and mortgage services departments. The move
              into the new operations space was accomplished on July 10,
              enabling the Bank to maintain its focus on excellent customer
              service while continuing to grow at a rapid rate.
         o    The Company received regulatory approval to establish a seventh
              banking office in Manassas, Virginia which is expected to open in
              September 2004. The Bank has hired three lenders who have spent a
              significant part of their banking careers working in the Manassas
              market.
         o    The Company's expansion into the Chantilly and Manassas markets,
              along with the opening of the new operations center, are growth
              oriented initiatives taken after additional capital was raised in
              the fourth quarter of 2003. While these pro-active initiatives
              have increased operating expenses, as evidenced by the rise in the
              bank's efficiency ratio to 61% for the second quarter of 2004, the
              Company's focus remains on a long term strategy of expanding our
              franchise throughout the Northern Virginia market.
         o    The Company issued a three for two stock split for shareholders of
              record on May 14, 2004, payable June 1, 2004.

FINANCIAL OVERVIEW

         The following discussion provides information about the results of
operations and financial condition, liquidity, and capital resources of Bancorp
and should be read in conjunction with our consolidated financial statements and
notes thereto for the year ended December 31, 2003.

BALANCE SHEET

         June 30, 2004 vs. December 31, 2003 and June 30, 2003. Total assets
increased to $358.5 million at June 30, 2004, an increase of $52.8 million from
December 31, 2003, and an increase of $61.4 million from June 30, 2003. The
increase in assets since December 31, 2003 resulted from the Company's emphasis
on deposit generation as much as loan generation. During the six months ended
June 30, 2004, deposits increased $59.1 million over December 31, 2003, with
noninterest bearing deposits increasing $27.8 million, and interest bearing
deposits increasing $31.3 million. With the growth in deposits, the Company was
able to fund $35.6 million net increase in loans. Securities declined $37.5
million due to a combination of the sale of securities and the call of a number
of government agency securities, resulting in the short term liquidity position
of the Company improving $49.0 million. Net loans increased $58.9 million at
June 30, 2004 from June 30, 2003, as deposits increased $43.1 million between
the same periods. During the three months ended June 30, 2004, loans increased
$15.3 million as deposits increased $30.8 million.

RESULTS OF OPERATIONS

         Six Months 2004 vs. Six Months 2003. For the six months ended June 30,
2004, the Company had net income of $1,440 thousand, or $.31 per diluted share,
compared to $1,074 thousand, or $.29 per diluted share, for the comparable
period of 2003. The comparable earnings per share are impacted by the 600,000
shares issued in November 2003, coupled with the 3-for-2 stock split this year,
resulting in approximately 900,000 more shares outstanding in computing the 2004
earnings per share. Annualized return on average assets was .91% for the six
months ended June 30, 2004, compared to .90% for the same six month period in
2003. Return on average equity was 8.27% for the six months ended June 30, 2004,
compared with 10.93% for the same six month period in 2003. The substantial
increase in capital resulting from the completion of the November 2003 offering
and the time lag until such additional capital can be fully leveraged
significantly contributed to the reduced returns on equity in 2004.

                                       14
<PAGE>

         Second Quarter 2004 vs. Second Quarter 2003. For the quarter ended June
30, 2004, the Company had net income of $686 thousand, or $.15 per diluted
share, compared to $610 thousand, or $.17 per diluted share, for the comparable
quarter of 2003. As mentioned above, comparable earnings per share are impacted
by shares issued in November 2003, coupled with the 3-for-2 stock split this
year, resulting in more shares outstanding in computing the 2004 earnings per
share. Annualized return on average assets was .84% for the three months ended
June 30, 2004, compared to .96% for the same quarter in 2003. Return on average
equity was 7.85% for the quarter ended June 30, 2004, compared with 12.00% for
the second quarter of 2003.

         During the second quarter of 2004, the Company continued to focus on
managing its net interest margin, especially in light of the low interest rate
environment we have experienced over the past two and a half years. In 2001, the
Federal Reserve reduced interest rates 11 times, for a total reduction of 475
basis points, an unprecedented reduction both in terms of the number of, and
amount of, rate changes in a 12 month period. The Federal Reserve reduced
interest rates an additional 50 basis points in November 2002, and further
reduced rates by 25 basis points in June 2003. These dramatic reductions in a
relatively short period continued to impact the loan and investment portfolios
in 2003, as loans repriced on a delayed basis or renewed at lower interest
rates, and as investment securities matured or were called, and were reinvested
at lower rates. This was partially offset by continued repricing upon renewal of
certificates of deposit. These rate reductions resulted in a reduction in the
net interest margin, which declined from 5.09% in 2000 to 4.56% in 2001 to 3.90%
in 2002 to 3.73% in 2003. Despite these reductions, the Company's practice of
managing its interest rate risk process has mitigated the negative effect of
such a severely declining rate environment. In fact, the net interest margin
improved in the second quarter of 2004 compared to the second quarter of 2003,
increasing to 3.81%.

         Although the Company has continued to grow in asset size since its
inception in 1998 it has been able to control its operating efficiency. The
Company's efficiency ratio improved in the first six months of 2004 to 57.5%
compared to 58.8% during the first six months of 2003. The efficiency ratio is a
non-GAAP financial measure, which we believe provides investors with important
information regarding our operational efficiency. We compute our efficiency
ratio by dividing noninterest expense by the sum of net interest income on a tax
equivalent basis and noninterest income, which includes securities gains or
losses and gains or losses on the sale of mortgage loans. Comparison of our
efficiency ratio with those of other companies may not be possible, because
other companies may calculate the efficiency ratio differently.


                                       15
<PAGE>


QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                           2004                                     2003
                                             ------------------------------    -----------------------------------------------
(Dollars in thousands except share data)        SECOND           FIRST             FOURTH            THIRD           SECOND
                                             -------------    -------------    -------------    -------------    -------------
<S>                                          <C>              <C>              <C>              <C>              <C>
RESULTS OF OPERATIONS:
Net interest income                          $       2,878    $       2,861    $       2,602    $       2,495    $       2,261
Provision for loan losses                              194              299              190              123              171
Other income                                           309              281              360              358              280
Noninterest expense                                  1,941            1,697            1,568            1,608            1,448
Income before taxes                                  1,052            1,146            1,204            1,122              922
Net income                                             686              754              792              735              610

PER SHARE DATA:
Earnings per share, basic (1)                $        0.15    $        0.17    $        0.21    $        0.21    $        0.17
Earnings per share, diluted (1)              $        0.15    $        0.16    $        0.19    $        0.19    $        0.17
Weighted average shares (1)
          outstanding - basic                    4,435,638        4,429,442        3,956,060        3,499,775        3,452,919
                      - diluted                  4,676,515        4,662,740        4,187,978        3,738,317        3,715,871

AT PERIOD END
Loans                                        $     204,625    $     189,314    $     169,047    $     154,012    $     145,687
Earning assets                                     331,879          316,427          291,936          272,959          273,722
Total assets                                       358,469          334,104          305,651          288,914          297,054
Deposits                                           314,221          283,381          255,116          258,527          271,099
Stockholders' equity                                34,545           35,581           33,891           20,696           20,214

Book value per share (1)                     $        7.79    $        8.02    $        7.67    $        5.91    $        5.85
Shares outstanding (1)                           4,437,369        4,435,331        4,415,703        3,500,463        3,454,913

PERFORMANCE RATIOS:
Return on average assets                              0.84%            0.98%            1.05%            1.01%            0.96%
Return on average equity                              7.85%            8.70%           11.50%           14.50%           12.00%
Net interest margin                                   3.81%            3.91%            3.64%            3.65%            3.77%
Efficiency ratio (2)                                 60.90%           54.01%           52.93%           56.36%           56.99%

OTHER RATIOS:
Allowance for loan losses to total loans              1.13%            1.12%            1.16%            1.15%            1.15%
Equity to assets                                      9.64%           10.66%           11.09%            7.16%            6.80%
Nonperforming loans to total loans                    0.18%            0.18%            0.30%            0.27%            0.29%
Net charge-offs to total loans                        0.00%            0.08%            0.07%            0.02%            0.01%
Risk adjusted capital ratios:
          Tier 1                                      19.4%            20.4%            21.9%            14.7%            13.5%
          Total                                       20.4%            21.4%            22.9%            16.9%            14.4%
          Leverage ratio                              13.6%            14.2%            14.3%             9.4%             9.5%

</TABLE>

(1) Information has been adjusted to reflect the 3-for-2 stock split paid on
June 1, 2004, and the 5-for-4 stock split paid on May 16, 2003.

(2) Computed by dividing noninterest expense by the sum of net interest income
on a tax equivalent basis and noninterest income, including securities gains or
losses and gains or losses on the sale of loans. This is a non-GAAP financial
measure, which we believe provides investors with important information
regarding our operational efficiency. Comparison of our efficiency ratio with
those of other companies may not be possible, because other companies may
calculate the efficiency ratio differently.



                                       16
<PAGE>


NET INTEREST INCOME, AVERAGE BALANCES AND YIELDS

         Net interest income is the difference between interest and fees earned
on assets and the interest paid on deposits and borrowings. Net interest income
is one of the major determining factors in the Bank's performance as it is the
principal source of revenue and earnings. Unlike the larger regional or
mega-banks that have significant sources of fee income, community banks, such as
James Monroe Bank, rely on net interest income from traditional banking
activities as the primary revenue source.

         Tables 1 and 2 provide certain information relating to the Company's
average consolidated statements of financial condition and reflect the interest
income on interest earning assets and interest expense of interest bearing
liabilities for the six months and quarters ended June 30, 2004 and 2003 and the
average yields earned and rates paid during those periods. These yields and
costs are derived by dividing income or expense by the average daily balance of
the related asset or liability for the periods presented. The Company did not
have any tax exempt income during any of the periods presented in Tables 1 and
2. Nonaccrual loans have been included in the average balances of loans
receivable.

         Six Months 2004 vs. Six Months 2003. For the six month period ended
June 30, 2004, net interest income increased $1.4 million, or 33%, to $5.7
million from $4.3 million earned during the same period in 2003. This was
primarily a result of the increase in the volume of earning assets, and
partially offset by the effect of declining interest rates, loan repricing, and
short term investments. During the six months ended June 30, 2004, total average
earning assets increased by $72.4 million, or 32%, from the same period of 2003.
Average loans outstanding grew by $53.4 million, or 40%, during the first six
months of 2004 compared to the same period in 2003, but, at the same time, the
yield on such loans decreased by 63 basis points. Average securities increased
$28.0 million, or 39%, during the first six months of 2004 compared to the same
period in 2003 while the yield on the securities portfolio declined by 97 basis
points. Many securities were called throughout 2003 and into 2004. These called
bonds were reinvested in lower yielding securities. Additional securities were
purchased from the liquidity generated throughout the past year and invested in
securities at yields greater than federal funds, but less than yields generated
by loans.

         During the six months ended June 30, 2004, total interest bearing
liabilities increased $47.7 million, or 30% from the same period of 2003.
Interest bearing deposits increased $38.1 million and borrowings, which includes
fed funds purchased and trust preferred capital notes, increased $9.6 million.
Interest expense paid on these liabilities for the first six months of 2004 was
$2.0 million compared with $1.8 million for the same period of 2003.

         The yield on earning assets declined 24 basis points from 5.41% for the
six month period ending June 30, 2004 to 5.17% during the same period in 2004.
The overall yield on loans dropped 63 basis points and the securities portfolio
declined 97 basis points reflecting the overall decline in interest rates from
the first six months of 2003 to the same period this year. The cost of funds
declined 33 basis points from 2.22% for the six month period ending June 30,
2004 to 1.89% during the same period in 2004.

         The resulting effect of the changes in interest rates between the six
month periods ended June 30, 2004 and 2003, offset by changes in the volume and
mix of earning assets and interest bearing liabilities resulted in a virtually
stable net interest margin of 3.85% in 2004 versus 3.83% in 2003. Management
believes this stability is indicative of the Company's interest rate risk
management process.



                                       17
<PAGE>


TABLE 1: AVERAGE BALANCE SHEETS, NET INTEREST INCOME, AND YIELDS/RATES

<TABLE>
<CAPTION>

                                                   Six Months Ended                      Six Months Ended
                                                     June 30, 2004                        June 30, 2003
                                          -----------------------------------  ----------------------------------
                                           Average                     Yield/   Average                    Yield/
(Dollars in thousands)                     Balance     Interest        Rate     Balance     Interest       Rate
                                          ---------    ---------        ----   ---------    ---------       ----
<S>                                       <C>          <C>              <C>    <C>          <C>             <C>
ASSETS
Loans:
  Commercial                              $  49,451    $   1,362        5.54%  $  39,109    $   1,243       6.41%
  Commercial real estate                    125,075        4,071        6.55%     81,955        2,889       7.11%
  Consumer                                   13,399          377        5.66%     13,472          441       6.60%
                                          ---------    ---------        ----   ---------    ---------       ----
    Total loans                             187,925        5,810        6.22%    134,536        4,573       6.85%

Mortgage loans held for sale                    653           18        5.48%      1,092           25       6.85%
Taxable securities                          100,675        1,825        3.65%     72,645        1,390       4.62%
Federal funds sold and cash equivalents      10,250           50        0.99%     18,852          100       1.07%
                                          ---------    ---------        ----   ---------    ---------       ----

    TOTAL EARNING ASSETS                    299,503        7,703        5.17%    227,125        6,088       5.41%

Less allowance for loan losses               (2,107)                              (1,508)
Cash and due from banks                      16,738                               12,296
Premises and equipment, net                   1,648                                1,386
Other assets                                  2,912                                1,585
                                          --------                             ---------
    TOTAL ASSETS                          $ 318,694                            $ 240,884
                                          =========                            =========


LIABILITIES AND STOCKHOLDERS'
EQUITY

Interest-bearing demand deposits          $  12,351    $      41        0.66%  $   8,933    $      39       0.88%
Money market deposit accounts               131,037        1,116        1.71%    105,321        1,029       1.97%
Savings accounts                              3,064           19        1.24%      1,465           11       1.51%
Time deposits                                48,276          542        2.26%     40,916          571       2.81%
Trust preferred capital notes                 9,000          210        4.68%      5,000          127       5.12%
Other borrowed funds                          5,593           36        1.30%          -            -       0.00%
                                          ---------    ---------        ----   ---------    ---------       ----
    TOTAL INTEREST-BEARING
    LIABILITIES                             209,321        1,964        1.89%    161,635        1,777       2.22%
                                          ---------    ---------        ----   ---------    ---------       ----
Net interest income and net yield on
interest earning assets                                $   5,739        3.85%               $   4,311       3.83%
                                                       =========        ====                =========       ====


Noninterest-bearing demand deposits          73,250                               58,619
Other liabilities                             1,134                                  819
Stockholders' equity                         34,989                               19,811
                                          ---------                            ---------

    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUTIY                  $ 318,694                            $ 240,884
                                          =========                            =========

</TABLE>



                                       18
<PAGE>


         Second Quarter 2004 vs. Second Quarter 2003. For the quarter ended June
30, 2004, net interest income increased $617 thousand, or 27%, to $2.9 million
from $2.3 million earned during the same period in 2003. This was primarily a
result of the increase in the volume of earning assets, and partially offset by
the effect of declining interest rates, loan repricing, and short term
investments. During the quarter ended June 30, 2004, total average earning
assets increased by $64.0 million, or 27%, from the same period of 2003. Average
loans outstanding grew by $57.8 million, or 41%, during the second quarter of
2004 compared to the same period in 2003, but, at the same time, the yield on
such loans decreased by 66 basis points. Average securities increased $11.6
million, or 15%, during the second quarter of 2004 compared to the same period
in 2003 while the yield on the securities portfolio increased slightly by 3
basis points.

         During the quarter ended June 30, 2004, average interest bearing
liabilities increased $46.8 million, or 28% from the same period of 2003.
Interest bearing deposits increased $39.3 million and borrowings, which includes
fed funds purchased and trust preferred capital notes, increased $7.5 million.
Interest expense paid on these liabilities during the second quarter of 2004 was
$1.0 million compared with $900 thousand for the same period of 2003.

         The yield on earning assets declined 15 basis points from 5.27% for the
quarter ending June 30, 2004 to 5.12% during the same period in 2004. The
overall yield on loans dropped 66 basis points reflecting the overall decline in
interest rates from the second quarter of 2003 to the same period this year. The
cost of funds declined 28 basis points from 2.17% for the quarter ending June
30, 2004 to 1.89% during the same period in 2004.

         The resulting effect of the changes in interest rates between the
quarters ended June 30, 2004 and 2003, offset by changes in the volume and mix
of earning assets and interest bearing liabilities resulted in a virtually
stable net interest margin of 3.81% in 2004 versus 3.77% in 2003. Management
believes this stability is indicative of the Company's interest rate risk
management process.




                                       19
<PAGE>

TABLE 2: AVERAGE BALANCE SHEETS, NET INTEREST INCOME, AND YIELDS/RATES

<TABLE>
<CAPTION>

                                                           Three Months Ended                       Three Months Ended
                                                             June 30, 2004                              June 30, 2003
                                                 -------------------------------------      --------------------------------------
                                                  Average                       Yield/        Average                       Yield/
(Dollars in thousands)                            Balance      Interest         Rate          Balance       Interest         Rate
                                                 ---------      ---------       ----         ---------      ---------        ----
<S>                                              <C>            <C>             <C>          <C>            <C>              <C>
ASSETS
Loans:
  Commercial                                     $  51,496      $     761       5.94%        $  40,066      $     632        6.33%
  Commercial real estate                           133,266          2,075       6.26%           87,049          1,531        7.05%
  Consumer                                          13,769            191       5.58%           13,632            220        6.47%
                                                 ---------      ---------       ----         ---------      ---------        ----
    Total loans                                    198,531          3,027       6.13%          140,747          2,383        6.79%

Mortgage loans held for sale                           730             10       5.51%            2,170             25        4.62%
Taxable securities                                  86,956            802       3.71%           75,366            692        3.68%
Federal funds sold and cash equivalents             18,555             41       0.89%           22,491             62        1.11%
                                                 ---------      ---------       ----         ---------      ---------        ----

    TOTAL EARNING ASSETS                           304,772          3,880       5.12%          240,774          3,162        5.27%

Less allowance for loan losses                      (2,200)                                     (1,586)
Cash and due from banks                             20,561                                      13,091
Premises and equipment, net                          1,812                                       1,408
Other assets                                         3,462                                       1,813
                                                 ---------                                   ---------
    TOTAL ASSETS                                 $ 328,407                                   $ 255,500
                                                 =========                                   =========


LIABILITIES AND STOCKHOLDERS'
EQUITY

Interest-bearing demand deposits                 $  12,993      $      22       0.68%        $   9,689      $      21        0.87%
Money market deposit accounts                      135,707            582       1.72%          109,087            528        1.94%
Savings accounts                                     3,370             10       1.19%            1,607              6        1.50%
Time deposits                                       49,014            273       2.24%           41,434            283        2.74%
Trust preferred capital notes                        9,000            105       4.69%            5,000             63        5.05%
Other borrowed funds                                 3,499             10       1.15%                -              -        0.00%
                                                 ---------      ---------       ----         ---------      ---------        ----

    TOTAL INTEREST-BEARING
    LIABILITIES                                    213,583          1,002       1.89%          166,817            901        2.17%
                                                 ---------      ---------       ----         ---------      ---------        ----

Net interest income and net yield on
interest earning assets                                         $   2,878       3.81%                       $   2,261        3.77%
                                                                =========       ====                        =========        ====


Noninterest-bearing demand deposits                 78,490                                      67,480
Other liabilities                                    1,229                                         807
Stockholders' equity                                35,105                                      20,396
                                                 ---------                                   ---------

    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUTIY                         $ 328,407                                   $ 255,500
                                                 =========                                   =========


</TABLE>



                                       20
<PAGE>

         Table 3 shows the composition of the net change in net interest income
for the periods indicated, as allocated between the change in net interest
income due to changes in the volume of average earning assets and interest
bearing liabilities, and the changes in net interest income due to changes in
interest rates. As the table shows, the increase in net interest income of $617
thousand for the three months ended June 30, 2004, as compared to the three
months ended June 30, 2003, is due to the growth in the volume of earning assets
and interest bearing liabilities. While the decrease in interest rates has, to
date, affected total interest income, and to a lesser extent, total interest
expense, management has controlled its exposure to changes in interest rates
such that the negative effect of the decline in interest rates and the decline
in loan yields, as adjustable rate loans have repriced downward over the past
several years, resulted in a modest $110 thousand reduction of net interest
income, whereas the growth in earning assets and deposits resulted in an
increase of $727 thousand to net interest income. Interest expense during these
comparable quarters, second quarter 2004 versus second quarter 2003, increased
$101 thousand or 11%, from $901 thousand in interest expense in 2003 to $1.0
million in interest expense in 2004. The overall cost of interest bearing
liabilities decreased 28 basis points from 2.17% in 2003 to 1.89% in 2004.

         The increase in net interest income of $1.4 million for the six months
ended June 30, 2004, as compared to the six months ended June 30, 2003, is due
to growth in earning assets and interest bearing liabilities. Management has
controlled its exposure to changes in interest rates such that the negative
effect of the decline in interest rates and the decline in loan yields, as
adjustable rate loans have repriced downward over the past several years,
resulted in a modest $358 thousand reduction of net interest income, whereas the
growth in earning assets and deposits resulted in an increase of $1.8 million to
net interest income. Interest expense during the first six months of 2004
compared to the same period in 2003 grew $187 thousand with a $629 thousand
increase attributable to growth in interest bearing liabilities offset by $442
thousand decrease in interest expense as a result of reducing interest rates on
interest bearing liabilities.

TABLE 3

<TABLE>
<CAPTION>

                                                       Three Months Ended June 30,            Six Months Ended June 30,
                                                            2004 vs. 2003                           2004 vs. 2003
                                                   ----------------------------------   ------------------------------------
                                                                     Due to Change                           Due to Change
                                                    Increase          in Average         Increase             in Average
                                                       or        --------------------       or          --------------------
(Dollars in thousands)                             (Decrease)     Volume       Rate      (Decrease)     Volume         Rate
                                                    -------      -------      -------      -------      -------      -------
<S>                                                 <C>          <C>          <C>          <C>          <C>          <C>
EARNING ASSETS:
Loans                                               $   644      $   981      $  (337)     $ 1,237      $ 1,829      $  (592)
Mortgage loans                                          (15)         (67)          52           (7)         (15)           8
Taxable securities                                      110          107            3          435          647         (212)
Federal funds sold and cash equivalents                 (21)         (11)         (10)         (50)         (46)          (4)
                                                    -------      -------      -------      -------      -------      -------
Total interest income                                   718        1,010         (292)       1,615        2,415         (800)

INTEREST BEARING LIABILITIES:
Interest bearing demand deposits                          1            7           (6)           2           15          (13)
Money market deposit accounts                            54          129          (75)          87          253         (166)
Savings deposits                                          4            -            4            8           12           (4)
Time deposits                                           (10)          52          (62)         (29)         103         (132)
Borrowed funds                                           52           95          (43)         119          246         (127)
                                                    -------      -------      -------      -------      -------      -------
Total interest expense                                  101          283         (182)         187          629         (442)
                                                    -------      -------      -------      -------      -------      -------
Net interest income                                 $   617      $   727      $  (110)     $ 1,428      $ 1,786      $  (358)
                                                    =======      =======      =======      =======      =======      =======

</TABLE>



                                       21
<PAGE>

PROVISION AND ALLOWANCE FOR LOAN LOSSES

         The provision for loan losses is based upon a methodology that includes
among other factors, a specific evaluation of commercial and commercial real
estate loans that are considered special mention, substandard or doubtful. All
other loans are then categorized in pools of loans with common characteristics.
A potential loss factor is applied to these loans which considers the historical
charge off history of the Company and its peer group, trends in delinquencies
and loan grading, current economic conditions, and factors that include the
composition of the Company's loan portfolio. At June 30, 2004, the Company had a
$184,000 impaired loan on nonaccrual status and an additional $181,000 in loans
on nonaccrual status or past due 90 days or more and still accruing. See Note 4
to the unaudited consolidated financial statements for additional information
regarding the Company's asset quality and allowance for loan losses.

         A methodology established in 2003 determining an appropriate allowance
for loan losses was approved by the Audit Committee and the Board of Directors.
The quarterly provision is approved by the Board. The methodology is reevaluated
on a quarterly basis. Pending the development of a negative trend with respect
to past due loans or charge offs or significant changes in economic conditions,
the Company continues to maintain an allowance it believes is adequate.

         As reflected in Table 4 below, the allowance is allocated among the
various categories of loans based upon the methodology described herein.


TABLE 4

         The following table shows the allocation of the allowance for loan
losses at the dates indicated. The allocation of portions of the allowance to
specific categories of loans is not intended to be indicative of future losses,
and does not restrict the use of the allowance to absorb losses in any category
of loans. See Note 4 to the unaudited consolidated financial statements included
in this report for additional information regarding the allowance for loan
losses and nonperforming assets.

<TABLE>
<CAPTION>

                                                       JUNE 30, 2004      DECEMBER 31, 2003      JUNE 30, 2003
                                                     ----------------    -------------------   -----------------
                                                               Percent              Percent                Percent
                                                               Of Total             Of Total              Of Total
(Dollars in thousands)                                Amount    Loans     Amount     Loans      Amount     Loans
                                                      ------    -----     ------     -----      ------     -----
<S>                                                   <C>        <C>      <C>         <C>       <C>         <C>
Construction loans                                    $   58     11.1%    $   50      10.8%     $   45      11.3%
Commercial loans                                       1,182     14.7%       984      14.7%        678      18.7%
Commercial real estate loans                           1,006     67.8%       823      67.0%        841      61.8%
Real estate 1-4 family residential                        18      0.8%         4       2.2%          4       3.4%
Home equity loans                                         15      2.3%         9       1.9%          9       2.1%
Consumer loans                                            26      3.3%        85       3.4%         92       2.8%
                                                      ------    -----     ------     -----      ------     -----
Balance end of the period                             $2,305      100%    $1,955       100%     $1,669       100%
                                                      ======    =====     ======     =====      ======     =====
</TABLE>


LOANS

         The loan portfolio is the largest component of earning assets and
accounts for the greatest portion of total interest income. At June 30, 2004,
total loans were $204.6 million, a 40.5% increase from the $145.7 million in
loans outstanding at June 30, 2003. Total loans at June 30, 2004 represented a
21.0% increase from the $169.0 million of loans at December 31, 2003. In
general, loans are internally generated with the exception of a small percentage
of participation loans purchased from other local community banks. Lending
activity is largely confined to our market of Northern Virginia. We do not
engage in highly leveraged transactions or foreign lending activities.

         Loans in the commercial category, as well as commercial real estate
mortgages, consist primarily of short term (five year or less final maturity)
and/or floating or adjustable rate commercial loans made to small to medium
sized companies. We do not have any agricultural loans in the portfolio. There
are no substantial loan concentrations to any one industry or to any one
borrower.


                                       22
<PAGE>

         Virtually all of the Company's commercial real estate mortgage and
development loans, which account for approximately 68% of our total loans at
June 30, 2004, relate to property in the Northern Virginia market. As such, they
are subject to risks relating to the general economic conditions in that market,
and the market for real estate in particular. While the region has experienced
some decline in economic activity during 2002 and 2003, the local real estate
market remains generally strong, and the Company attempts to mitigate risk
though careful underwriting, including primary reliance on the borrower's
financial capacity and ability to repay without resort to the property, and
lends primarily with respect to properties occupied or managed by the owner.

         The Company's 1-4 family residential real estate loans are generally
not the typical purchase money first mortgage loan or refinancing, but are loans
made for other purposes and the collateral obtained is a first deed of trust on
the residential property of the borrower. The underlying loan would have a final
maturity much shorter than the typical first mortgage and may be a variable or
fixed rate loan. As reflected in Table 5, 31% of the Company's loans are fixed
rate loans and 69% of the Company's loans reprice or have a maturity date that
falls within five years.

         Consumer loans consist primarily of secured installment credits to
individuals. The consumer portfolio, which includes consumer loans, home equity
loans, and 1-4 family residential loans, represents 6.4% of the loan portfolio
at June 30, 2004, as compared to 8.3% at June 30, 2003 and 7.5% at December 31,
2003.

TABLE 5

         Table 5 shows the maturities of the loan portfolio and the sensitivity
of loans to interest rate fluctuations at June 30, 2004. Maturities are based on
the earlier of contractual maturity or repricing date. Demand loans, loans with
no contractual maturity and overdrafts are represented in one year or less.

<TABLE>
<CAPTION>

                                                                   JUNE 30, 2004
                                                 --------------------------------------------------
                                                              AFTER ONE
                                                  WITHIN     YEAR THROUGH    AFTER FIVE
(Dollars in thousands)                           ONE YEAR     FIVE YEARS       YEARS         TOTAL
                                                 --------     ----------     -----------   --------
<S>                                              <C>           <C>           <C>           <C>
Construction loans                               $ 22,691      $      -      $      -      $ 22,691
Commercial loans                                   26,687         3,425             -        30,112
Commercial real estate loans                       55,427        78,242         5,114       138,783
Real estate 1-4 family residential                    375           944           319         1,638
Home equity loans                                   4,720             -             -         4,720
Consumer loans                                      4,833         1,649             -         6,482
Deposit overdrafts                                    199             -             -           199
                                                 --------      --------      --------      --------
  Total                                          $114,932      $ 84,260      $  5,433      $204,625
                                                 ========      ========      ========      ========
<CAPTION>

                                                              AFTER ONE
                                                  WITHIN     YEAR THROUGH    AFTER FIVE
(Dollars in thousands)                           ONE YEAR     FIVE YEARS       YEARS         TOTAL
                                                 --------     ----------     -----------   --------
<S>                                              <C>           <C>           <C>           <C>
Fixed rate                                       $ 24,577      $ 34,259      $  5,433      $ 64,269
Variable/Adjustable rate                           90,355        50,001             -       140,356
                                                 --------      --------      --------      --------
  Total                                          $114,932      $ 84,260      $  5,433      $204,625
                                                 ========      ========      ========      ========
</TABLE>

INVESTMENT SECURITIES

         The Company currently, and for all periods shown, classifies its entire
securities portfolio as available for sale. Increases in the portfolio have
occurred whenever deposit growth has outpaced loan demand and the forecast for
loan growth is such that the investment of excess liquidity in investment
securities (as opposed to short term investments such as federal funds) is
warranted. In general, our investment philosophy is to acquire high quality
government agency securities or high grade corporate bonds, with a maturity of
five to six years or less in the case of fixed rate securities. In the case of
mortgage backed securities, the policy is to invest only in those securities
whose average expected life is projected to be approximately five to six years
or less. Mortgage backed securities with a maturity of ten years or more are
either adjustable rate securities or the expected life of the mortgage pool is
generally no more than five or six years. To the extent possible, we attempt to
"ladder" the one time call dates for all our securities. The Company's
investment policy is driven by its interest rate risk process and the need to
minimize the effect of changing interest rates to the entire balance sheet.



                                       23
<PAGE>

         The following table provides information regarding the composition of
our investment portfolio at the dates indicated.

TABLE 6

<TABLE>
<CAPTION>

                                                                  AT JUNE 30, 2004           AT JUNE 30, 2003
                                                               ----------------------    -------------------------
                                                                           Percent of                   Percent of
(Dollars in thousands)                                         Balance      Portfolio    Balance        Portfolio
                                                               -------     ----------    --------       ----------
<S>                                                            <C>              <C>       <C>              <C>
AVAILABLE FOR SALE (FAIR VALUE):
     U.S. Agency                                               $64,924          76.5%     $47,922          58.7%
     Mortgage-backed securities                                 14,795          17.4%      14,598          17.9%
     Adjustable rate mortgage-backed securities                  1,981           2.3%       4,852           6.0%
     Corporate bonds                                             2,187           2.6%      13,367          16.4%
     Restricted stock                                              988           1.2%         841           1.0%
                                                               -------         -----      -------         -----
TOTAL                                                          $84,875         100.0%     $81,580         100.0%
                                                               =======         =====      =======         =====

</TABLE>

TABLE 7

         The following table provides information regarding the maturity
composition of our investment portfolio, at fair value, at June 30, 2004.

                             MATURITY OF SECURITIES
                                Years to Maturity
<TABLE>
<CAPTION>


                                         Within             Over 1 Year        Over 5 Years         Over
(Dollars in thousands)                   1 Year          through 5 Years     through 10 Years      10 Years              Total
                                    -----------------   ----------------   ----------------  ------------------   -----------------
                                    Amount     Yield    Amount    Yield    Amount    Yield   Amount      Yield    Amount      Yield
                                    -------    ------   -------   ------   -------   ------  -------     ------   -------    ------
<S>                                 <C>        <C>     <C>        <C>      <C>       <C>     <C>         <C>     <C>         <C>
AVAILABLE FOR SALE (FAIR VALUE):
U. S. Agency                        $36,377    3.99%   $28,547    3.86%    $   -        -    $     -         -   $64,924     3.93%
Mortgage-backed securities               46    6.47%     1,268    4.74%      487     4.21%    12,994      4.78%   14,795     4.76%
Adjustable rate mortgage-
 backed securities                        -       -          -       -         -        -      1,981      4.41%    1,982     4.41%
Corporate bonds                           -       -      2,187    5.36%        -        -          -         -     2,187     5.36%
Restricted stock                          -                  -       -         -        -        988      5.41%      988     5.41%
                                    -------            -------             -----             -------             -------
 Total debt securities
   Available for sale               $36,423    3.99%   $32,002    4.00%    $ 487     4.21%   $15,963      4.77%  $84,875     4.14%
                                    =======            =======             =====             =======             =======

</TABLE>



                                       24
<PAGE>

LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

         The primary objectives of asset and liability management are to provide
for the safety of depositor and investor funds, assure adequate liquidity, and
maintain an appropriate balance between interest sensitive earning assets and
interest bearing liabilities. Liquidity management involves the ability to meet
the cash flow requirements of customers, who may be depositors wanting to
withdraw funds or borrowers needing assurance that sufficient funds will be
available to meet their credit needs.

         We define liquidity for these purposes as the ability to raise cash
quickly at a reasonable cost without principal loss. The primary liquidity
measurement we utilize is called the Basic Surplus, which captures the adequacy
of our access to reliable sources of cash relative to the stability of our
funding mix of deposits. Accordingly, we have established borrowing facilities
with other banks (Federal funds) and the Federal Home Loan Bank as sources of
liquidity in addition to the deposits.

         The Basic Surplus approach enables us to adequately manage liquidity
from both tactical and contingency perspectives. At June 30, 2004, our Basic
Surplus ratio (net access to cash and secured borrowings as a percentage of
total assets) was approximately 9.5% compared to the present internal minimum
guideline range of 5% to 10%.

         Financial institutions utilize a number of methods to evaluate interest
rate risk. Methods range from the original static gap analysis (the difference
between interest sensitive assets and interest sensitive liabilities repricing
during the same period, measured at a specific point in time), to running
multiple simulations of potential interest rate scenarios, to rate shock
analysis, to highly complicated duration analysis.

         One tool that we utilize in managing our interest rate risk is the
matched funding matrix. The matrix arrays repricing opportunities along a time
line for both assets and liabilities. The longer term, more fixed rate sources
are presented in the upper left hand corner while the shorter term, more
variable rate items, are at the lower left. Similarly, uses of funds, such as
assets, are arranged across the top moving from left to right.

         The body of the matrix is derived by allocating the longest fixed rate
funding sources to the longest fixed rate assets and shorter term variable
sources to shorter term variable uses. The result is a graphical depiction of
the time periods over which we expect to experience exposure to rising or
falling rates. Since the scales of the liability and assets sides are identical,
all numbers in the matrix would fall within the diagonal lines if we were
perfectly matched across all repricing time frames. Numbers outside the diagonal
lines represent two general types of mismatches: liability sensitive in time
frames when numbers are to the left of the diagonal line and asset sensitive in
time frames when numbers are to the right of the diagonal line.

         At June 30, 2004, we were modestly liability sensitive in the short
term and then we become asset sensitive out beyond two years. This is primarily
caused by the assumptions used in allocating a repricing term to nonmaturity
deposits--demand deposits, savings accounts, and money market deposit accounts.
The actual impact due to changes in interest rates is difficult to quantify in
that the administrative ability to change rates on these products is influenced
by competitive market conditions in changing rate environments, prepayments of
loans, customer demands, and many other factors. These products may not reprice
consistently with assets such as variable rate commercial loans or other loans
that immediately reprice as the prime rate changes. While the traditional gap
analysis and the matched funding matrix show a general picture of our potential
sensitivity to changes in interest rates, it cannot quantify the actual impact
of interest rate changes.

         Thus, the Company manages its exposure to possible changes in interest
rates by simulation modeling or "what if" scenarios to quantify the potential
financial implications of changes in interest rates. In practice, each quarter
approximately 14 different "what if" scenarios are evaluated which include the
following scenarios: Static Rates, Most Likely Rate Projection, Rising Rate
Environment, Declining Rate Environment, Ramp Up 100bp and 200bp over 12-months,
and Ramp Down 100bp and 200bp over 12-months scenarios. In addition, 8 rate
shock scenarios are modeled at 50bp up and 50bp down increments but not below
zero. At June 30, 2004, the following 12-month impact on net interest income is
estimated to range from a positive impact of 9.3% if rates rise dramatically, to
a negative impact of (3.2)% if rates decline from current levels. See the
summary that follows. The Company believes these ranges of exposure to changes
in interest rates to be well within acceptable range given a wide variety of
potential rate change scenarios. This process is performed each quarter to
ensure the Company is not materially at risk to possible changes in interest
rates.


                                       25
<PAGE>


         The following are the projected potential percentage impact on the
Company's net interest income over the next 12 months for the most likely to
occur scenarios, but measured against a static interest rate environment as of
June 30, 2004. The Company is positioned to improve earnings if rates continue
to rise. With respect to further reductions in rates, Declining Rate scenario
and the Ramp Down scenarios, the Company would experience further negative
implications on margins and earnings; however, the Company does not believe that
a 200 basis point decline is realistic given the already extremely low interest
rates. Thus management believes the exposure to further changes in interest
rates would not have a material negative effect on the results of operations.

                 Static Rates                                     -0-%
                 Most Likely Rates                                6.4%
                 Ramp Up 100bp- 12 months                         2.0%
                 Ramp Up 200bp- 12 months                         4.3%
                 Ramp Down 100bp- 12 months                     (1.2)%
                 Rising Rate Scenario                             9.3%
                 Low Rate Environment                           (2.4)%

NONINTEREST INCOME AND EXPENSE

         Noninterest income consists primarily of services charges on deposit
accounts and fees and other charges for banking services. Noninterest expense
consists primarily of salary and benefit costs and occupancy and equipment
expense. To date, the company has not been required to pay any premiums for
deposit insurance. To the extent that deposit premiums may become required, the
Company's results of operations will be adversely affected.

         The following table shows the detail of noninterest income for the
three and six month periods ended June 30, 2004 and 2003.

TABLE 8

         The categories of noninterest income that exceed 1% of operating
revenue are as follows:

<TABLE>
<CAPTION>
                                                   THREE-MONTHS ENDED JUNE 30,          SIX-MONTHS ENDED JUNE 30,
                                                 -------------------------------      ------------------------------
(Dollars in thousands)                                2004             2003               2004            2003
                                                 ----------------  -------------      --------------  --------------
<S>                                                         <C>            <C>                <C>             <C>
Service charges on deposit accounts                         $ 98           $ 80               $ 182           $ 155
Cash management fees                                          24             27                  48              53
Other fee income                                              65             47                 135              80
Gain on sale of mortgages                                    108             85                 171              85
Gain on sale of securities                                    14             41                  54              56
                                                 ----------------  -------------      --------------  --------------
Total noninterest income                                   $ 309          $ 280               $ 590           $ 429
                                                 ================  =============      ==============  ==============

</TABLE>

         The increases in noninterest income for the each period shown are the
result of the continued growth of the Company and the expansion of products
resulting in fee income. During the second quarter of 2003, we began originating
conforming residential mortgage loans on a pre-sold basis, for sale to secondary
market investors, servicing released.




                                       26
<PAGE>

TABLE 9

         The categories of noninterest expense that exceed 1% of operating
revenue are as follows:

<TABLE>
<CAPTION>

                                               THREE-MONTHS ENDED JUNE 30,        SIX-MONTHS ENDED JUNE 30,
                                           -------------------------------      ------------------------------
(Dollars in thousands)                          2004            2003                2004            2003
                                           ---------------  --------------      --------------  --------------
<S>                                               <C>               <C>               <C>             <C>
Salaries and benefits                             $ 1,135           $ 747             $ 2,158         $ 1,437
Occupancy cost, net                                   163             148                 328             303
Equipment expense                                      92             104                 166             200
Professional fees                                      56              36                 101              72
Data processing costs                                  98              98                 203             197
Courier and express services                           35              30                  76              59
Advertising and public relations                       61              15                 105              46
State franchise tax                                    66              50                 131              93
Director fees                                          52              29                  86              53
Other outside services                                 63              11                  76              20
Other                                                 120             180                 208             308
                                           ---------------  --------------      --------------  --------------
  Other noninterest expense                       $ 1,941         $ 1,448             $ 3,638         $ 2,788
                                           ===============  ==============      ==============  ==============

</TABLE>

         Noninterest expense increased $850 thousand or 30% from $2.8 million to
$3.6 million for the first six months of 2004, as compared to the same period in
2003. Approximately 85% of this increase is in salary and benefit costs. In the
second quarter of 2003 the Company added personnel to staff the newly formed
mortgage division and during 2003 the Company added a number of commercial loan
officers and processing staff to develop new business and support the growth in
customers and transactions being processed. The increase in state franchise tax
is due to the increased capital of the Bank from earnings retention and a
capital infusion in January 2004. Noninterest expense increased $493 thousand or
34% from $1.4 million to $1.9 million for the second quarter of 2004 as compared
to the same period in 2003. Approximately 79% of this increase is in salary and
benefit costs.

DEPOSITS AND OTHER BORROWINGS

         The principal sources of funds for the Bank are core deposits (demand
deposits, NOW accounts, money market accounts, savings accounts and certificates
of deposit less than $100,000) from the local market areas surrounding the
Bank's offices. The Bank's deposit base includes transaction accounts, time and
savings accounts and accounts which customers use for cash management and which
provide the Bank with a source of fee income and cross marketing opportunities
as well as a low cost source of funds. Time and savings accounts, including
money market deposit accounts, also provide a relatively stable and low cost
source of funding.

TABLE 10

         The following table reflects deposits by category for the periods
indicated.

<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED JUNE 30,
                                                  ------------------------------------------------------
                                                               2004                      2003
                                                  --------------------------  --------------------------
(Dollars in thousands)                                Average       Average       Average     Average
                                                      Balance        Rate         Balance       Rate
                                                     ---------     ---------     ---------   ----------
<S>                                                   <C>           <C>           <C>         <C>
Deposits
    Noninterest-bearing demand                        $ 78,490          - %       $ 67,480         - %
    Interest-bearing demand                             12,993       0.68            9,689      0.87
    Money Market                                       135,707       1.72          109,087      1.94
    Savings                                              3,370       1.19            1,607      1.50
    Certificates of deposit of $100,000 or more         34,834       2.22           26,962      2.75
    Other time                                          14,180       2.29           14,472      2.72
                                                  -------------  -----------  -------------  -----------
Total interest bearing deposits                        201,084       1.77 %        161,817      2.08 %
                                                  -------------               -------------
Total deposits                                       $ 279,574                   $ 229,297
                                                  =============               =============

</TABLE>



                                       27
<PAGE>


TABLE 11

         The following table indicates the amount of certificates of deposit of
less than $100,000 and $100,000 or more, and their remaining maturities as of
June 30, 2004.

<TABLE>
<CAPTION>

(Dollars in thousands)                          3 MONTHS       4 TO 6      7 TO 12     OVER 12
                                                 OR LESS        MONTHS      MONTHS      MONTHS      TOTAL
                                                --------      ---------    -------    ----------    ------
<S>                                              <C>          <C>          <C>        <C>          <C>
Certificates of deposit less than $100,000       $ 3,954       $ 3,275     $ 4,524    $ 1,914      $13,667
Certificates of deposit of $100,000 or more       10,023         7,971      19,176      1,816       38,986
                                                 -------       -------     -------    -------      -------
                                                 $13,977       $11,246     $23,700    $ 3,730      $52,653
                                                 =======       =======     =======    =======      =======

</TABLE>

CAPITAL MANAGEMENT

         Management monitors historical and projected earnings, asset growth, as
well as its liquidity and various balance sheet risks in order to determine
appropriate capital levels. At June 30, 2004, stockholders' equity increased
$14.3 million to $34.5 million from the $20.2 million in equity at June 30, 2003
as a result of the $3.0 million increase in retained earnings over the past
twelve months and the $12.8 million net proceeds from the equity sold in
November 2003, offset by a decline in other comprehensive income of $2.0 million
resulting from unrealized gains and losses on securities.

         Capital Requirement. A comparison of the Company's and the Bank's
regulatory capital at June 30, 2004, compared to minimum regulatory capital
guidelines is shown in the table that follows.

TABLE 12

<TABLE>
<CAPTION>

                                                      Minimum       Minimum To Be
                                        Actual      Guidelines    "Well Capitalized"
                                       --------     ----------    ------------------

<S>                                    <C>          <C>            <C>
Total Risk-Based Capital
     Company                            20.4%          8.0%              N/A
     Bank                               12.7%          8.0%             10.0%

Tier 1 Risk-Based Capital
     Company                            19.4%          4.0%              N/A
     Bank                               11.7%          4.0%              6.0%

Tier 1 Leverage Ratio
     Company                            13.5%          4.0%              N/A
     Bank                                8.5%          4.0%              5.0%

</TABLE>


ITEM 3.  CONTROLS AND PROCEDURES

         The Company's management, under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer,
evaluated, as of the last day of the period covered by this report, the
effectiveness of the design and operation of the Company's disclosure controls
and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were adequate. There were no changes in the Bank's internal control
over financial reporting (as defined in Rule 13a-15 under the Securities Act of
1934) during the quarter ended June 30, 2004 that has materially affected, or is
reasonably likely to materially affect, the Bank's internal control over
financial reporting.



                                       28
<PAGE>


                           PART II. Other Information

Item 1.  Legal Proceedings
         None

Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity
         Securities

     (a) Modification of Rights of Registered Securities.     None

     (b) Issuance or Modification of Other Securities Affecting Rights of
         Registered Securities.     None

     (c) Sales of Unregistered Securities.  None

     (d) Use of Proceeds.  Not Applicable.

     (e) Small Business Issuer Purchases of Securities.       None

Item 3.  Defaults Upon Senior Securities
         None

Item 4.  Submission of Matters to a Vote of Security Holders

         On April 29, 2004, the annual meeting of shareholders of the Company
was held for the purpose of electing eleven (11) directors to serve until the
next annual meeting and until their successors are duly elected and qualified.
The name of each director elected at the meeting, who constitute the entire
Board of Directors in office upon completion of the meeting, and the votes cast
for such persons are set forth below.

               Name             For            Against          Abstain
               ----             ---            -------          -------
Dr. Terry L. Collins         2,317,590         14,392              -
Norman P. Horn               2,317,590         14,392              -
Dr. David C. Karlgaard       2,314,188         17,794              -
Richard I. Linhart           2,317,590         14,392              -
Richard C. Litman            2,317,590         14,392              -
John R. Maxwell              2,317,590         14,392              -
Dr. Alvin E. Nashman         2,317,955         18,027              -
Helen L. Newman              2,317,590         14,392              -
Thomas L. Patterson          2,317,590         14,392              -
David W. Pijor               2,317,590         14,392              -
Russell E. Sherman           2,302,607         29,375              -

         At the annual meeting, the shareholders were also asked to vote on an
amendment to the Company's Articles of Incorporation increasing the number of
authorized shares of common stock to 10,000,000. The votes cast on the amendment
were as follows:

          For          Against         Abstain         Broker Non-votes
          ---          -------         -------         ----------------
       2,292,933       37,056          1,893                  -


Item 5.  Other Information
         None




                                       29
<PAGE>


Item 6.  Exhibits and reports on Form 8-K

(a) Exhibits

Number    Description
------    -----------
3(a)     Articles of Incorporation of James Monroe Bancorp (1)
3(b)     Bylaws of James Monroe Bancorp (2)
4(a)     Indenture, dated as of March 26, 2002 between James Monroe Bancorp,
         Inc. and State Street Bank and Trust Company of Connecticut, National
         Association, as trustee (3)
4(b)     Amended and Restated Declaration of Trust, dated as of March 26, 2002
         among James Monroe Bancorp, Inc., State Street Bank and Trust Company
         of Connecticut, National Association, as Institutional Trustee, and
         John R. Maxwell, David W. Pijor and Richard I. Linhart as
         Administrators (3)
4(c)     Guarantee Agreement dated as of March 26, 2002, between James Monroe
         Bancorp, Inc. and State Street Bank and Trust Company of Connecticut,
         National Association, as trustee (3)
4(d)     Indenture, dated as of July 31, 2003 between James Monroe Bancorp, Inc.
         and U.S. Bank, National Association, as trustee (3)
4(e)     Amended and Restated Declaration of Trust, dated as of July 31, 2003
         among James Monroe Bancorp, Inc., U.S. Bank, National Association, as
         Institutional Trustee, and John R. Maxwell, David W. Pijor and Richard
         I. Linhart as Administrators (3)
4(f)     Guarantee Agreement dated as of July 31, 2003, between James Monroe
         Bancorp, Inc. and U.S. Bank, National Association, as trustee (3)
10(a)    Employment contract between James Monroe Bancorp and John R. Maxwell(4)
10(b)    Employment contract between James Monroe Bancorp and Richard I. Linhart
         (5)
10(c)    James Monroe Bancorp 1998 Management Incentive Stock Option Plan (6)
10(d)    James Monroe Bancorp 2000 Director's Stock Option Plan (7)
10(e)    James Monroe Bancorp, Inc. 2003 Equity Compensation Plan (8)
11       Statement re: Computation of Per Share Earnings

             Please refer to Note 2 to the financial statements included in
             this report.

21           Subsidiaries of the Registrant
31(a)        Certification of Chief Executive Officer
31(b)        Certification of Chief Financial Officer
32(a)        Certification of Chief Executive Officer
32(b)        Certification of Chief Financial Officer

--------------------
(1)      Incorporated by reference to exhibit 3(a) to the Company's Quarterly
         Report on Form 10-QSB for the quarter ended March 31, 2004.
(2)      Incorporated by reference to exhibit 3(b) to the Company's registration
         statement on Form SB-2 (No. 333-38098).
(3)      Not filed in accordance with the provisions of Item 601(b)(4)(iii) of
         Regulation SK. The Company agrees to provide a copy of these documents
         to the Commission upon request.
(4)      Incorporated by reference to exhibit of same number to the Company's
         Annual Report on Form 10-KSB for the year ended December 31, 2002.
(5)      Incorporated by reference to exhibit of same number to the Company's
         Annual Report on Form 10-KSB for the year ended December 31, 2003.
(6)      Incorporated by reference to exhibit 10(b) to the Company's
         registration statement on Form SB-2 (No. 333-38098).
(7)      Incorporated by reference to exhibit 10(c) to the Company's
         registration statement on Form SB-2 (No. 333-38098).
(8)      Incorporated by reference to exhibit 10(e) to the Company's Quarterly
         Report on Form 10-QSB for the quarter ended June 30, 2003.

(b)      Reports on Form 8-K

         On April 19, 2004, the Company filed a current report on Form 8-K
reporting earnings for the quarter ended March 31, 2004.

         On May 5, 2004, the Company filed a current report on Form 8-K
reporting the announcement of the 3 for 2 stock split.

                                       30
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date: August 11, 2004                   BY: /s/John R. Maxwell
                                            ----------------------------------
                                        John R. Maxwell, President &
                                        Chief Executive Officer


Date: August 11, 2004                   BY: /s/ Richard I. Linhart
                                            ----------------------------------
                                        Richard I. Linhart, Executive Vice
                                        President & Chief Operating and
                                        Financial Officer







                                       31